ITALY finally has a new coalition government after tense negotiations saw pro-Europe compromise candidate Giovanni Tria chosen as the country’s finance minister.

The populist Five Star and far-right League capitulated to the demands of the markets in agreeing to Italian President Sergio Mattarella’s veto of Eurosceptic politician Paolo Savona.

They had previously called for Mr Mattarella’s impeachment over the decision, yet backed down after four days of talks to form a coalition government and avoid early elections.

“All the conditions have been fulfilled for a political Five Star and League government,” they said in a joint statement.

Giuseppe Conte has been sworn in as Prime Minister, with the anti-immigration League leader Matteo Salvini appointed Interior Minister.

Five Star Movement leader Luigi Di Maio has been made Industry Minister while Mr Savona, the coalition’s original choice for finance minister, has been made Minister for European Affairs.

It brings an end to Italy’s “institutional crisis” and three months without a government since the general election in March.

European governments expressed concern over plans to appoint Mr Savona, fearing his economic policy may not be in line with stringent eurozone rules.

The appointment of law professor Mr Conte comes after former International Monetary Fund (IMF) economist Carlo Cottarelli failed to form a technocratic government at the request of Mr Matterella.

However, the new coalition government could still find themselves at loggerheads with the EU over welfare spending and tax cuts which may not be in line with the neoliberal bloc’s spending rules.

The appointment of the far-right Mr Salvini as Interior Minister has caused concern due to his racist stance on immigration.

He campaigned on a promise of mass deportations of migrants and said a new government would build detention centres around Italy.